### Supernormal and negative growth

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1. Supernormal Growth. Finley Corporation is increasing quickly. Dividends are expected to increase at 25% rate for the next three years, with a growth rate falling off to a constant 6% thereafter. If the required rate of return is 14 percent and the company just paid a \$2.50 dividend, what is the current share price?

2. Negative Growth. Antiques 'R'Us is a mature manufacturiing firm. The company just paid a \$10. dividend, but management expects to reduce the payout by 10% per year, indefinitely. If you require a 13 percent return on this stock, what will you pay for a share today?

3. Finding the Dividend. Tubby Corporation stock currently sells for \$72 per share. The market requires a 14 percent return on the firm's stock. If the company maintains a constant 6 percent growth rate in dividends, what was the most recent dividend per share paid on the stock?

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